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Getting What We Pay For: Low Overhead Limits Nonprofit Effectiveness

Nonprofit organizations feel pressures to conform to expectations to keep overhead expenses down, and thus maximize the proportion of resources that can be devoted to programs. Yet recent years have witnessed a countervailing trend: significant investment in organizational capacity building, including areas properly considered overhead. These different approaches raise important questions.How adequate are the administrative and fundraising capabilities of nonprofit organizations? How does strength or weakness in these areas relate to the overall effectiveness and efficiency of the organization? And to the extent that weaknesses exist, what appears to be their cause?To study these issues in depth, we conducted detailed discussions with nine organizations. The organizations ranged in size from under $1 million to over $40 million in annual expenditures. They represented various fields of work, such as health, education, and the arts. This brief highlights three groups of findings relating to organizational effectiveness that emerged from these case studies.